If you want to know what is debt review, in this article will give you the full explanation and the important information that you need to know. .
What is debt review?
Debt review is a relief program that assists clients who are battling to reach their debt commitment. It is a process through which a debt counselor engages with the client’s creditors and agrees on payment options on their behalf, lessening their payments to a convenient amount per month. This is done by bundling all of your individual debts into one compound debt, and then that debt is comes with a lower interest negotiated by the debt counsellors.
Debt review was introduced in June 2007. This was after the enactment of the National Credit Act 34 of 2005.
What is the reason to go under debt review?
Debt review is a relief program put in place for people who are over-indebted. That means that you have more debts than what you are able to pay off with your current income.
If left alone without a solution, your debt would only grow and leave you in a deeper hole. So the NCA introduced debt review to help South Africans who are in such a predicament so that they can have a way out.
So in order to go under debt review, you have to be assess and qualify as an over-indebted person.
Now that you know what debt review is, let’s look at how it works.
Is Debt Review a good idea?
In the past, being under debt review was so stigmatizing that no one wanted to be known or labeled as such. However, days are long gone as many institutions have come up to counsel people on how to cope and move on with their life normally even if they are under debt review. The counselors will help people who are under debt review by coming up with a budget by looking at their income and expenditures.
Very many people can find themselves in debt review as no one is shielded. This could be due to the hard economic crash that is being experienced worldwide. This depicts a huge variety of customers who have sought solace from debt consolidation. Applying for a debt review is the simple and easy way that your debt counselor will advise throughout the process. The counselor will answer all your questions. Debt review is a good alternative for a client as all clients are unique and have different needs.
Some citizens have nonsensical ideas concerning the procedure, the results, and the advantages thereof. Some may perceive it as another loan, while others see it as a procedure where their debts are waived without them having to settle them with their debtors. Worse still, they may perceive it as being linked to the administration.
However, all these are misconceptions that should be erased from people’s minds for them to be in a good book with various credit bureaus on the land. If you want to learn about what debt review is and how it works, here is what you should know.
How does debt review work?
After applying for the debt review the debt counselor normally registers the applicant with the National Credit Regulator. Eventually, the NCR will inform all the pertinent Credit Bureaus of the request and record some of your credit record. After all the debts have been cleared, the history of Debt Counselling will be eliminated from the records.
The National Credit Act introduced debt counseling to help over-indebted clients through the development of a repayment plan, that is affordable to you and is admissible to all Credit Providers. The process is geared toward helping clients fighting with debt. This is by budget advice, dialogue with Credit Providers for decreased payment installments, and the revision of debts.
What is Debt Review process?
Step 1- Contacting of Debt Counsellor
Unless one reaches out to a debt counselor, it is not possible to know one’s needs. There are several debt reviews companies to select from. It is advisable to select a company that has NCR registered debt counselor. The counselor should have the customer’s best interests.
Always look for a debt review company that has positive reviews from their past customers.
Step 2- Telephonic Assessment
Debt review is very simple as it is done online through emails and telephone calls. Taking time off from your busy schedule or work is not required to meet with the counselors in person. You just need to notify them of the best time to talk with them and they will get in touch as soon as possible.
The initial engagement will involve an obligation-free initial assessment. Consequently, you will be furnished with an introductory streamlined amount depending on the data that you provide. The amount may change slightly as the procedure officially continues.
Step 3- Debt Review Application
After getting a clear insight into how debt review can work for you, the official application will start. This requires a maximum dedication beginning input on your part. This will enable the debt review company to best take you through and obtain your application approved as soon as possible to avoid delays and back and forth.
You will be needed to offer the debt review company with data and any relevant documents concerning your financial situation. It is important to note that the debt review company will only ask for information that is important for the successful debt review application and approval.
Step 4- Informing the Creditors that you are Off-Limits
After all the needed documentation has been obtained as well as the information, the debt review company proceeds in letting your creditors know. These are the companies that you owe by informing them that you are officially under debt review. From the time the debt review company gets the application, you are guarded under the National Credit Act, and the debt review company is your security net.
The creditors will then send the debt review company a certificate of balance (COB) that might take just about 5-10 business days. After the receipt of the COBs, the debt review company can go-ahead to send out the proposals to each of the creditors as agreed with you. Still, there will be a bit of a waiting period which is about 14-20 working days.
Your creditors will thereafter accept or decline the debt review company’s offer. If they decline, there will be sent together with an alternative proposal. The alternative proposal can be accepted or rejected by the debt review company. The decision by the debt review company to accept or reject the alternative proposal will be based on what they know is a bet to their client.
If a consensus cannot be attained, the debt review company will seek acceptance by taking the matter to the Magistrates Court on your behalf. Even though, this phenomenon does not happen frequently as proposals are commonly accepted. At this beginning stage of the debt review process, all your credit lines like overdrafts, credit cards, and credit facilities are suspended immediately. At the credit bureaus, you will be listed as ‘under debt review’
Step 5- Payment and Acceptance
For a proposal to be concluded, it takes some time. Even though, payment on the initial amount that you are provided with upon the first assessment, should start in the first month. This way, the debt counselor safeguards you from creditors asking for payment from you directly.
After the interested parties have agreed and the acceptance letters are received from all creditors, you will require to begin paying the official arranged amount immediately. This will be used as an order of the court.
The ground rule is to never skip any payment. Keeping up with your debt review payments from month one gives you immunity. In case you are threatened by the creditors in the future, you just inform them that you are under debt review. It is important to notify your debt counselor of such a threat. This will assist you in such future threats that they will make sure, it will not happen again.
If your date of payment is due before proposal finalization, the debt review company may require you to change your bank account to another financial institution to shield you from unnecessary debt orders running.
Step 6- Payment process
Every client has a distinct financial position. It is not easy to just say for how long you will stay under debt review. It might be for a period of up to 5 years, or a bit more. This will depend on your total debts.
The more you play, the sooner you will finish. Just in case your financial position gets better at any particular period, just inform your debt counselor so that you can discuss trying to put more money towards your monthly installments. This will of cause accelerate your payment arrangement.
Little amounts could also get paid up faster. Even so, it will not affect your original monthly premiums. The excess money will immediately go about other outstanding fees. You may even feel like quitting the debt review process before maturity. Again and again, it is wiser to see go through it till the end as there is an advantage of the security that the NCA provides while you are under debt review.
What about Debt Review Clearance?
Once you are under debt review, you will pay off the debt review over the period that is agreed upon with your creditors, with the assistance of your debt counsellor.
You pay on a monthly basis and once you have payed off your entire debt, you can then apply for a debt clearance certificate. The debt clearance certificate is the proof that you have payed off your debt and then your name can be removed from debt review.
Once you are no long under debt review, your credit profile will begin to be restored and you can then be eligible for credit again.
So there we have answered the question, what is debt review. If you are over-indebted and need help regarding your debts, you can contact a debt review company and they can help you with the steps that you need to take to get assessed and go under debt review if required.